French vic­tory in GE bat­tle for Al­stom

The French rail and en­ergy gi­ant Al­stom said it will be able to pro­tect French in­ter­est and save jobs af­ter a deal worth $17 bln to sell off most of its power gen­er­a­tion busi­ness to US ri­val Gen­eral Elec­tric.

France ap­proved the deal af­ter se­cur­ing an op­tion to buy a 20% stake in Al­stom al­low­ing it a say in pro­tect­ing French in­ter­ests, af­ter the com­pany re­jected a ri­val of­fer from Siemens and Mit­subishi Heavy In­dus­tries.

The agree­ment comes af­ter months of ne­go­ti­a­tions and, as a re­sult of the French govern­ment’s in­ter­ven­tion, is sub­stan­tially dif­fer­ent from GE’s orig­i­nal of­fer, which had been for a straight­for­ward pur­chase of Al­stom’s power busi­ness.

The new deal, which the govern­ment sup­ports, will see GE buy Al­stom’s op­er­a­tions that man­u­fac­ture nat­u­ral gas tur­bines for power plants.

In turn, Al­stom will buy GE’s rail­way sig­nalling sys­tems di­vi­sion. In ad­di­tion, GE and Al­stom will cre­ate three joint ven­tures, equally owned, for power grid, re­new­able en­ergy and nu­clear power businesses.

Al­stom’s shares fell 1.8% in trad­ing on Mon­day af­ter the agree­ment with GE was an­nounced.

“This is a way of or­gan­is­ing our­selves in the face of glob­al­i­sa­tion. It builds al­liances rather than al­low­ing France to be­come a gi­ant shop­ping cen­tre for for­eign cor­po­ra­tions to come and prey on our com­pa­nies,” said French econ­omy min­is­ter Ar­naud Mon­te­bourg.

A se­nior pres­i­den­tial aide said it was “per­fectly nat­u­ral” for the govern­ment to have in­ter­vened in the deal, not­ing nu­clear power was strate­gi­cally im­por­tant. “Such a deal would have been im­pos­si­ble for a French com­pany in the US,” he added.

Patrick Kron said buy­ing a stake in Al­stom would be a “good in­vest­ment” for the French govern­ment.

“This is a com­pany which has a strong po­ten­tial of value cre­ation and I’m ex­pect­ing that all share­hold­ers will ben­e­fit from this value cre­ation,” he said.

How­ever, Peter Ram­sauer, chair­man of the Ger­man par­lia­ment’s eco­nom­ics com­mit­tee, crit­i­cised the French de­ci­sion to favour the GE bid and re­ject the joint bid from Siemens and MHI.

“The French govern­ment acts with ice-cold na­tional in­dus­trial in­ter­est, and the French govern­ment has clearly put its own na­tional in­ter­ests, one-sided French con­cerns, ahead of Euro­pean in­ter­ests,” he told Ger­man ra­dio sta­tion Deutsch­land­funk.

GE chair­man and chief ex­ec­u­tive Jeff Im­melt said the deal was “good for France, GE and Al­stom”.

And many an­a­lysts be­lieve it is a good deal de­spite the French govern­ment’s in­ter­ven­tion.